Gold falls as investors evaluate US rate cut prospects

GOLD prices fell on Thursday as investors assessed the prospects of monetary policy easing in the U.S. this year, after the Federal Reserve indicated the progress on inflation has stalled and interest rates would stay higher for longer.

Spot gold fell 0.9% at $2,297.39 per ounce by 1202 GMT.

U.S. gold futures fell 0.2% to $2,306.30.

“For gold, pushing rate cuts into the long grass until towards the end of the year might have been considered bearish, but (yesterday) the dollar rose and then came off giving gold a lift…for now, rate cuts are a pleasure deferred,” independent analyst Ross Norman said.

Spot prices rose 1.4% on Wednesday, their best day in more than two weeks as the U.S. dollar and Treasury yields tumbled lower, but bullion has since given up more than half of those gains.

The Federal Reserve held interest rates steady on Wednesday and signaled it is still leaning towards eventual reductions in borrowing costs, but put a red flag on recent disappointing inflation readings that could make those rate cuts a while in coming.

Fed Chair Jerome Powell said the next move would depend on data, but there was unlikely to be an increase.

Elevated interest rates increase the opportunity cost of holding non-yielding bullion.

Attention now turns to the U.S. non-farm payrolls report due on Friday for further clues on the health of the labor market.

Meanwhile, the global economy is growing faster than expected only a few months ago thanks to resilient U.S. activity while inflation is converging more quickly than expected with central banks’ targets, the OECD said, upgrading its outlook.

Among other precious metals, spot silver fell 1.6% to $26.21 per ounce, palladium dropped 1.6% to $934.07, while platinum rose 0.4% to $953.55 per ounce.

“Platinum reached price parity with palladium, driven by its growing use in auto catalysts for gasoline-powered cars,” analysts at ANZ noted.

“On the supply side, platinum is more supported than palladium due to operational challenges in South Africa.” – Reuters